Learning Aim C & D – Sainsbury’s
External factors that affect Sainsbury’s when conducting international business
Sainsbury's is currently the second largest chain of supermarkets in the United Kingdom with a
15.5% share of the supermarket sector. 1 They were founded in 1869, by John Sainsbury with a small
independent shop in Drury Lane, London. In this report I will be evaluating the feasibility of
Sainsbury’s expanding to operate in one other country. I conducted extensive research into different
business options and different countries they could operate in before finally deciding on Sainsbury’s,
see appendix 1. I chose Sainsbury’s because they currently only operate in the UK but are a major
retailer that has the potential to operate in international countries. However, before investigating
and recommending which country Sainsbury’s should target for international trade it is important to
understand the business itself using in-depth research and a PESTLE analysis.
Sainsbury’s currently only operates in the UK, which means they have lots of options for
international trade. Recently statistics showed that Sainsbury’s owns 1,423 grocery stores in the UK,
815 of which were convenience stores. 2
PESTLE
A PESTLE analysis is a situational analysis tool that is used to investigate the external factors affecting
a specific business. I will be using a PESTLE analysis to evaluate the external environment for
Sainsbury’s by looking into different factors, including:
Political
Economic
Social
Technological
Legal
Environmental
Political
Political factors are probably one of the most important factors to stay informed about for
organisations, because all organisations must follow the laws and regulations set out by the
government which means companies need to know how upcoming legislations may affect their
business.
Sainsbury’s currently operate in the UK and therefore will be affected by BREXIT. Brexit is one of the
most current and important political events to occur in recent years because it effects almost every
aspect of British companies. At this point it is impossible to make a clear judgement on whether
Brexit will be a positive or negative thing for companies because Britain is yet to come to an
agreement with the European Union on the deal to be made so that Britain can leave the EU.
However, we can predict how this will affect businesses; I have put these into a clear table.
Positive Negative
Companies will have fewer regulations Companies may have to pay new taxes and
governing how they can conduct business, customs costs as well as deal with slower
which could cause growth. administration processes for conducting
1
, business with suppliers in mainland Europe.
Unburdened by EU trade rules, the United Companies may have difficulty hiring qualified
Kingdom could negotiate better trade employees from outside of the United Kingdom
agreements with non-EU countries. to address the skills shortage, and employees
who are non-British nationals may be required
to obtain a visa or work permit in order to keep
working in the United Kingdom.
Even though the pound may be worth less Other countries may be hesitant to invest in the
because of Brexit it could actually help United Kingdom until it is clear that the UK
manufacturers export their goods. This is economy can be successful while independent
because a good economy in Britain is one of the of the EU, which could weaken the pound.
main deterrents to overseas customers buying
British goods.
The government will no longer contribute to Britain’s trade relationship with the EU could be
the EU budget, which means more money for weakened if the Brexit negotiations go poorly.
the government to use for public sector This situation could get worse if the United
organisations e.g. NHS. Kingdom is unable to secure beneficial trade
deals with other countries.
Sainsbury’s CEO Mike Coupe has given his opinion on BREXIT, saying that it is likely to increase costs
for customers. He said ‘ The reality is that it is a challenge, in the sense that we currently bring things
in from the European Union – about 30% - unencumbered, and anything that gets in the way of that
will either add costs or reduce freshness.’ 3. This suggests that not only will costs increase but quality
may decrease due to the extended waiting times for food and other products during shipping.
Overall, all supermarkets are agreeing that a no-deal BREXIT is likely to cause increased prices and
shortages of fresh fruit and veg.
This is a factor Sainsbury’s will need to think about when considering to trade internationally
because it could determine the country they decide to operate in. For example, with the
unpredictability of BREXIT it may be unwise to venture into international trade with a country in the
EU as we do not know what the relationship will be between Britain and the EU after BREXIT.
Economic
There are many economic factors that affect Sainsbury’s, these include:
Inflation rate
Interest rate
Economic growth
Exchange rates
Demand/supply
Recession
Tax levels
Employment levels
Since 2011 unemployment levels in the UK have been steadily decreasing, meaning the number of
people 16+ that are employed is increasing. In 2015 the BBC said, ‘the employment rate now stands
at 73.3%, the highest rate of people in work since the ONS began keeping records in 1971 4.
Although this is generally seen as a positive it can be seen as both a positive and negative for
Sainsbury’s. The more people unemployed the easier it will be for Sainsbury’s during recruitment
2
, because more people are available for hire. However, it can also be seen as a negative because when
people are unemployed they are a lot more careful with their money and are less likely to spend a
lot at one of Sainsbury’s stores. This is because Sainsbury’s is quite a high end supermarket just
below Waitrose and M&S foodhall. This means that customers on a tight budget would be likely to
choose a more cost effective competitor e.g. Lidl or Aldi to save money during unemployment.
Inflation rates in the UK are currently lower than usual at 1.8% in January compared to the 2.1% in
previous months.5 Low inflation rates are a good thing for Sainsbury’s because the price of goods
and services should be lower than normal and therefore more appealing the customers without
having a negative effect on Sainsbury’s profit.
Social
Social factors are all about the public, which is includes factors such as:
Demographic factors
population growth rate
Cultural aspects
Age distribution
Health consciousness
Current trends
Lifestyle
Attitudes
A change in any social factor is highly likely to affect the amount of products sold and therefore
revenues earned. This is because social factors directly affect the people you are selling to and how
they respond to your product. Sainsbury’s constantly has to adapt to changing social factors in order
to keep up customer demand for their service/products.
In modern society consumers prefer convenience and one-stop shipping. This means that customers
like to have all of the products available in one place so that they do not have to travel to different
stores. To meet this need Sainsbury’s introduced non-food products into their stores in order to
supply consumers with everything they want without having to visit other stores after shopping with
them. More recently, to improve customer convenience Sainsbury’s has formed self-service
checkouts where customers can pay quickly for smaller purchases than having to que and be served
by a shopping assistant. These are both changes that Sainsbury’s has made over the years in order to
fit into customer demands.
Another social factor to consider for Sainsbury’s is the recent push for healthy options. They have
adapted to this change by introducing schemes such as their healthier choice product ranges. They
now offer healthy: ready meals, meal deals, recipes, vegan range, etc. They have had to adapt to
this social change in order to keep ahead of competitors. For example, Tesco were also quick to
identify and meet the demands for healthy products by offering free fruit to children in stores.
Sainsbury’s had to make their own strategies to get ahead of this quickly in order to maintain their
competitive advantage.
Technological
3
External factors that affect Sainsbury’s when conducting international business
Sainsbury's is currently the second largest chain of supermarkets in the United Kingdom with a
15.5% share of the supermarket sector. 1 They were founded in 1869, by John Sainsbury with a small
independent shop in Drury Lane, London. In this report I will be evaluating the feasibility of
Sainsbury’s expanding to operate in one other country. I conducted extensive research into different
business options and different countries they could operate in before finally deciding on Sainsbury’s,
see appendix 1. I chose Sainsbury’s because they currently only operate in the UK but are a major
retailer that has the potential to operate in international countries. However, before investigating
and recommending which country Sainsbury’s should target for international trade it is important to
understand the business itself using in-depth research and a PESTLE analysis.
Sainsbury’s currently only operates in the UK, which means they have lots of options for
international trade. Recently statistics showed that Sainsbury’s owns 1,423 grocery stores in the UK,
815 of which were convenience stores. 2
PESTLE
A PESTLE analysis is a situational analysis tool that is used to investigate the external factors affecting
a specific business. I will be using a PESTLE analysis to evaluate the external environment for
Sainsbury’s by looking into different factors, including:
Political
Economic
Social
Technological
Legal
Environmental
Political
Political factors are probably one of the most important factors to stay informed about for
organisations, because all organisations must follow the laws and regulations set out by the
government which means companies need to know how upcoming legislations may affect their
business.
Sainsbury’s currently operate in the UK and therefore will be affected by BREXIT. Brexit is one of the
most current and important political events to occur in recent years because it effects almost every
aspect of British companies. At this point it is impossible to make a clear judgement on whether
Brexit will be a positive or negative thing for companies because Britain is yet to come to an
agreement with the European Union on the deal to be made so that Britain can leave the EU.
However, we can predict how this will affect businesses; I have put these into a clear table.
Positive Negative
Companies will have fewer regulations Companies may have to pay new taxes and
governing how they can conduct business, customs costs as well as deal with slower
which could cause growth. administration processes for conducting
1
, business with suppliers in mainland Europe.
Unburdened by EU trade rules, the United Companies may have difficulty hiring qualified
Kingdom could negotiate better trade employees from outside of the United Kingdom
agreements with non-EU countries. to address the skills shortage, and employees
who are non-British nationals may be required
to obtain a visa or work permit in order to keep
working in the United Kingdom.
Even though the pound may be worth less Other countries may be hesitant to invest in the
because of Brexit it could actually help United Kingdom until it is clear that the UK
manufacturers export their goods. This is economy can be successful while independent
because a good economy in Britain is one of the of the EU, which could weaken the pound.
main deterrents to overseas customers buying
British goods.
The government will no longer contribute to Britain’s trade relationship with the EU could be
the EU budget, which means more money for weakened if the Brexit negotiations go poorly.
the government to use for public sector This situation could get worse if the United
organisations e.g. NHS. Kingdom is unable to secure beneficial trade
deals with other countries.
Sainsbury’s CEO Mike Coupe has given his opinion on BREXIT, saying that it is likely to increase costs
for customers. He said ‘ The reality is that it is a challenge, in the sense that we currently bring things
in from the European Union – about 30% - unencumbered, and anything that gets in the way of that
will either add costs or reduce freshness.’ 3. This suggests that not only will costs increase but quality
may decrease due to the extended waiting times for food and other products during shipping.
Overall, all supermarkets are agreeing that a no-deal BREXIT is likely to cause increased prices and
shortages of fresh fruit and veg.
This is a factor Sainsbury’s will need to think about when considering to trade internationally
because it could determine the country they decide to operate in. For example, with the
unpredictability of BREXIT it may be unwise to venture into international trade with a country in the
EU as we do not know what the relationship will be between Britain and the EU after BREXIT.
Economic
There are many economic factors that affect Sainsbury’s, these include:
Inflation rate
Interest rate
Economic growth
Exchange rates
Demand/supply
Recession
Tax levels
Employment levels
Since 2011 unemployment levels in the UK have been steadily decreasing, meaning the number of
people 16+ that are employed is increasing. In 2015 the BBC said, ‘the employment rate now stands
at 73.3%, the highest rate of people in work since the ONS began keeping records in 1971 4.
Although this is generally seen as a positive it can be seen as both a positive and negative for
Sainsbury’s. The more people unemployed the easier it will be for Sainsbury’s during recruitment
2
, because more people are available for hire. However, it can also be seen as a negative because when
people are unemployed they are a lot more careful with their money and are less likely to spend a
lot at one of Sainsbury’s stores. This is because Sainsbury’s is quite a high end supermarket just
below Waitrose and M&S foodhall. This means that customers on a tight budget would be likely to
choose a more cost effective competitor e.g. Lidl or Aldi to save money during unemployment.
Inflation rates in the UK are currently lower than usual at 1.8% in January compared to the 2.1% in
previous months.5 Low inflation rates are a good thing for Sainsbury’s because the price of goods
and services should be lower than normal and therefore more appealing the customers without
having a negative effect on Sainsbury’s profit.
Social
Social factors are all about the public, which is includes factors such as:
Demographic factors
population growth rate
Cultural aspects
Age distribution
Health consciousness
Current trends
Lifestyle
Attitudes
A change in any social factor is highly likely to affect the amount of products sold and therefore
revenues earned. This is because social factors directly affect the people you are selling to and how
they respond to your product. Sainsbury’s constantly has to adapt to changing social factors in order
to keep up customer demand for their service/products.
In modern society consumers prefer convenience and one-stop shipping. This means that customers
like to have all of the products available in one place so that they do not have to travel to different
stores. To meet this need Sainsbury’s introduced non-food products into their stores in order to
supply consumers with everything they want without having to visit other stores after shopping with
them. More recently, to improve customer convenience Sainsbury’s has formed self-service
checkouts where customers can pay quickly for smaller purchases than having to que and be served
by a shopping assistant. These are both changes that Sainsbury’s has made over the years in order to
fit into customer demands.
Another social factor to consider for Sainsbury’s is the recent push for healthy options. They have
adapted to this change by introducing schemes such as their healthier choice product ranges. They
now offer healthy: ready meals, meal deals, recipes, vegan range, etc. They have had to adapt to
this social change in order to keep ahead of competitors. For example, Tesco were also quick to
identify and meet the demands for healthy products by offering free fruit to children in stores.
Sainsbury’s had to make their own strategies to get ahead of this quickly in order to maintain their
competitive advantage.
Technological
3
